Bad News on American Food Production this year.

Source: The Economist

I quote the explanation of these trends:

Barely a month ago American farmers were expecting bumper harvests and the prices of grains and oilseeds were falling. Since then a severe heatwave has hit the Midwest, wilting crops and sending prices soaring. Soyabeans have hit a record of over $16 a bushel. World stocks of the oilseed, which is crushed for animal feed, are already low following a drought in South America. Forecasts of end-season stocks in America, the biggest producer, have been cut by 7% in a month. The forecast for maize stocks has also been reduced since June, by 37%, and yields will be the lowest since 2003. Higher feed prices will depress American meat and poultry production, and are likely to affect other food prices as well.

This is not good news for the U.S. economy, which has enough problems already. It is unlikely to be a major problem at the American supermarkets since so much of the price of food here is packaging and distribution. Agricultural exports are also important in our balance of payments, and that also is a big problem.


The impact on poor people in poor countries will be hunger. Those folk spend a large part of their incomes on food, and the food they are able to buy is mostly composed of grains and legumes. The failure of the U.S. harvest will drive up prices for wheat and corn, but there is a substitution effect so the demand for other grains will also go up. The poor will take the blow in their wallets and in their stomachs.